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Friday, June 29, 2012

Landed homeowners sitting on a gold mine

It’s official! Landed home owners in Singapore are sitting on a pot of gold. In fact, over the past 10 years, landed properties in Singapore have seen a 101 percent value appreciation, notably higher than the 72 percent recorded for non-landed homes.

Back in Q1 2002, the private residential price index for landed homes stood at 117.2. Since then, the index has been on a roller coaster ride before regaining momentum to reach its present level – in the interim slipping to 115.9 in Q1 2003 and 113.5 in Q1 2004, one of its lowest levels.

But from 2005 onwards, the index started to gain steam and began appreciating again. As of Q1 this year, the index is at a high of 235.

Meanwhile, non-landed properties have also fared the same fate of an up and down cycle. Recording an index of 115.2 in Q1 2002, it fell a little to its lowest point in Q1 and Q2 2004 at 111.9. Subsequently, it bounced back to hit 198.1 in Q1 2012.

However, the difference in price appreciation between landed and non-landed properties is apparent.
Commenting on this trend, Tejaswi Chunduri, Regional Analyst at PropertyGuru, said: “It cannot be denied that demand for landed homes located on freehold or 999-year leasehold sites are relatively high as owners have almost full-ownership of the land.”

“However, the rental yield gained from such properties can at times be slightly lower than condominiums since the latter provides 24-hour security and facilities to residents.”
Nonetheless, landed properties still command very high capital appreciation in the long term because of the
high demand.

“Owning landed property is also a matter of national pride as it is only available to Singaporeans and permanent residents (PRs),” added Chunduri.

In general, landed home transactions fell across the majority of Singapore’s districts from 2007 to 2011. According to the number of caveats lodged, with data taken from the URA (Urban Redevelopment Authority), the largest drop in transactions was seen in prime districts 10 and 11 at 63 and 62 percent respectively.

An exception to the decline was recorded in districts 22 (including Boon Lay, Lakeside, Jurong) and 28 (Seletar and Yio Chu Kang), which saw increases at 85 and eight percent respectively.
On a positive note, median prices jumped significantly across most districts, with District 27, comprising the neighbourhoods of Yishun and Sembawang, posting the highest growth at 153 percent from S$342 psf to S$866 psf.

Significant price increases were also seen in districts 14 and 19 (both at 85 percent), District 20 (82 percent), District 4 (78 percent), District 23 (77 percent) and District 10 (61 percent).
Over at Sentosa Cove, pricing is notably more competitive given the limited supply of 400 landed homes and the precinct’s resort island status.

In addition, foreigners are allowed to purchase landed homes at Sentosa Cove. “These properties form the high-end segment of the property market and are deliberately marketed as world-class developments to attract wealthy and influential foreigners,” Chunduri added.

She also said that good class bungalows (GCBs), which are a special category of landed property, gained in popularity among ultra-rich buyers.

“In total, there are 39 gazetted GCB areas located in districts 10, 11, 21 and 23. Those in districts 10 and 11 command a higher price and greater volume of transactions as these are prime locations where acquiring land is extremely expensive. The fact that there are only around 2,500 GCBs in Singapore is an indication that prices could rise even more in future.”

While the supply of GCBs across the island is limited, demand is notably on the uptrend. Hence, prices are expected to rise further at different rates in different districts.